TaxTMI 
TaxTMI 
TaxTMI 
2009 (8) TMI 668
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.... income-tax references and income-tax appeals are also being disposed of by this common order as appeals preferred by the Revenue in the connected cases have been dismissed by the Tribunal in view of the order dated June 28, 1985, passed in I.T.A. No. 822/Nag/1984, D. R. Bansal v. CIT, and the question of law involved in all the references and appeals is the same, which has been referred by the Tribunal for our opinion in I. T. R. No. 17 of 2002. 3. In this order reference shall be made to the facts of I.T.R. No. 17 of 2002, being the leading case. 4. Briefly stated, the facts of the case are that a search operation under section 132 of the Income-tax Act, 1961 (in short "the Act") was conducted in the business and residential premises of the respondent assessees' group on the basis of warrant of authorization issued by the Commissioner of Income-tax, Jabalpur in the month of July, 1982. During the search operations, various documents, books of account relating to the firm M/s. Bansal Brothers and its sister concerns including the business transactions, the income which is not disclosed by the assessee in their return of income, were seized. 47 loose sheets, typed copy of the fin....
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....tely false, baseless entries in the form of loose sheets typed and handwritten by him and his colleague Shri P. Rajan, pertaining to the firm M/s. BB and M/s. Chhattisgarh Iron and Steel Works and partners (in short "M/s. CISW"), and the same were seized by the I. T. Department on July 20, 1982 mentioned in annexure A1 to the panchanama in respect of seizure and search made in the residential premises of Shri K. K. Bansal, partner of M/s. CISW. The same are not real, but false and bogus. A similar affidavit was sworn by Shri P. Rajan, accountant of the firm M/s. CISW. 7. The assessee on the strength of confession and affidavits of those accountants contended that these papers were false and fabricated and it was humanly not possible to explain something, which was written by someone without any basis. 8. The Assessing Officer (in short "AO") made enquiries and most of the persons, whose names were shown as creditors, denied to have any such transactions with the assessee group. The Assessing Officer proposed addition of Rs. 5,06,071.81 under section 144B of the Act. However, on approval from the Inspecting Assistant Commissioner, an addition of Rs. 2,08,904 was made and it ....
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....s of the fabricated documents. 10. Taking note of the fact that the accountants were still in the service of M/s. BB and M/s. CISW and no police action has been launched against them for fabricating the documents, the affidavits of the accountants have been disbelieved, and it has been observed in his order dated October 16, 1982, under section 132(5) in the case of M/s. BB, where the assessee is also a partner, it has been held that the papers found and seized from the residential premises of Smt. C. R. Bansal depict the true financial state of affairs of business of M/s. BB. Accordingly, addition of Rs. 5,06,071.81 under section 144B was proposed. However, as per the direction of the Inspecting Assistant Commissioner, Range-II issued under section 144B, addition of Rs. 2,08,904 was made and the total income of the assessee was assessed at Rs. 2,20,194. 11. In appeal filed by the assessee, the Commissioner of Income-tax (Appeals) dealing with four issues formulated for his consideration in paragraph 4 of his order, observed that the proceedings against the asses-sees were not criminal or quasi-criminal ; they are plain and simple assessment proceedings ; the provisions of the In....
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....nt proceedings are contained in Chapter XIV. The procedure for assessment of Chapter XIV lays down a complete code about the assessment. Thus, the presumption under section 132(4A) of the Act is circumscribed by the subject for which it has been provided for and does not extend to regular assessment proceedings. With these observations, deciding the first issue framed by him for adjudication of the appeal in favour of the assessee, it was held that the three sets of loose sheets are fabricated documents, they do not show the true and correct record of business dealings and transactions by the groups (M/s. BB, M/ s. CISW or even SHM and Co.) nor they record the true and correct income shown as divided amongst the partners inclusive of the appellant. They do not show any income earned by the group over and above which is truly and correctly recorded in the regular books of account maintained and produced before the Income-tax Department. 13. It has been further held that the two accountants, namely, Lalson and Rajan had hatched a conspiracy and planned to prepare fabricated documents showing incorrect and inflated transactions as well as figures in different....
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.... be brushed aside. Accordingly, it was held that in the light of confession made by the two accountants, the plea taken by the assessees that the three sets of loose sheets are false and fabricated and planted at the residence of Smt. C. R. Bansal by the accountants, appears to be probable. 15. The Tribunal finally concluded that the three sets of sheets seized are false and fabricated. The case of the Department is based purely on pre-sumptions, surmises and conjectures. To prove the genuineness of the seized three sets of loose papers, the Department failed to prove the inter-lacing and interlinking between the entries found in the three sets of loose sheets seized and the entries in the regular books of accounts. Only on the basis of the entries found in the three sets of sheets, the Revenue wanted to build up the case that the assessees are doing number two business. The assessees have proved beyond doubt that the three sets of sheets seized are false and fabricated. Further, the Commissioner of Income-tax (Appeals) has dealt with the points raised by the Inspecting Assistant Commissioner, senior Departmental representative and the Additional Director of Income-tax effectively....
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.... on by the group and accordingly, part of the transaction tallied with the transaction in the regular books of accounts/financial statements disclosed to the Department ; (v) that it also revealed that the cash accounts were meticulously maintained on weekly basis with ledger folio numbers containing the minutest details including tips, etc., paid to the peons of the Government Departments to air tickets purchased by the partners for attending marriages, etc. The entries are self-explanatory that the loose sheets contained accounts of clandestine number two business ; (vi) that from a perusal of the entries in the loose sheets, it could be safely inferred that the same were recorded over a period of time in the regular course during the relevant accounting year ; (vii) that on a close examination of the evidence of the two accountants namely, Shri N. B. Lalson and Shri P. Rajan, Shri Girijan, Shri D. R. Bansal and Shri K. K. Bansal, it is clear that the accountants were working with the group for a pretty long time, they were exercising substantial powers of taking decision including appointing employees ; they were the most trusted employees and were aware of the secre....
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....e on record. The evidence of issuing false challans, fabricated invoices, unrecorded sale of goods by the group have been brought on record both by way of corroborative material as well as the evidence of the two accountants recorded on July 24, 1982. 18. The Commissioner of Income-tax (Appeals) has also given weightage to the denial of the credit entries by the parties. However, number two entries are made in the business transactions in connivance with the parties to the transactions and, therefore, the question of admission by the persons with respect to the said entries does not arise. It is for the assessees to explain the entries in the loose sheets by leading cogent and reliable evidence and in the absence thereof, the presumption under section 132(4A) is attracted. 19. Reliance is placed on the judgments in the matters of CIT v. S. P. Jain [1973] 87 ITR 370 (SC) and CIT v. South Indian Rubber Products [1987] 166 ITR 687 (Ker). 20. On the other hand, Shri Shravan Agrawal, learned counsel for the respondent-assessees, argued that the Commissioner of Income-tax (Appeals) has elaborately discussed the material, including the documentary and oral evidence, available on ....
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....ce in any proceedings under the Income-tax Act. Sub-section (4A) of section 132 reads as under : "(4A) Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search, it may be presumed : (i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person ; (ii) that the contents of such books of account and other documents are true ; and (iii) that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that person's handwriting, and in the case of a document stamped, executed, or attested that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested." 26. It was further brought to our notice that section 292C was inserted by the Finance Act, 2007 (22 of 2007) with retrospective effect from October 1, 1975, whic....
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....namely, Shri N. B. Lalson and Shri P. Rajan. The Assessing Officer has disbelieved the explanation offered by the assessees based on confessions of the two accountants given on oath by assigning reasons in detail, which have been reproduced in the foregoing paragraphs. 28. The Commissioner of Income-tax (Appeals) has reversed the finding of the Assessing Officer and accepted the evidence of the assessees in this regard that the three sets of loose sheets were, in fact, planted by their accountants on the advice of some third person with a purpose to black-mail the assessees for some pecuniary gain. The Commissioner of Income-tax (Appeals) has also observed that the presumption attached under section 132(4A) falls under Chapter XIII of the Act, which deals with search and seizure and the same cannot be extended to regular assessment proceedings. The above finding is mainly based on the confessional statements given on oath by the two accountants. 29. The Tribunal has also accepted the explanation of the assessees in this regard by giving similar reasoning as given by the Commissioner of Income-tax (Appeals), and held that the loose sheets are forged and fabricated documents plant....
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....que or cheques and the same was paid in cash ; that he did not enter into any correspondence with the companies concerned ; that the benami purchaser was not in possession of the share scrips and the same were in possession of AM company ; that he did not take any step to get the shares registered in his name for nearly 1\xba years, etc., and it was held that the finding of the I. T. authorities that shares were purchased benami for the assessee was justified and the Tribunal was not justified in reversing the conclusion of I.T. authorities for no good reasons. 32. In the matter of South Indian Rubber Products [1987] 166 ITR 687 the High Court of Kerala considering that the Tribunal deleted the addition made by the Income-tax Officer without giving any cogent reasons for upsetting the findings of the Income-tax Officer, and that its conclusion was against the evidence available on record by wrongly placing burden of proof on the Revenue, held that the order of the Tribunal was vitiated and accordingly, set aside the same. 33. In the instant case also, the Assessing Officer after considering the over-all evidence available on record rejected the explanation of the assessee t....